Money flows to Sochi

With Sochi winning the right to host the 2014 Winter Olympics, Russia's government will invest up to $US 12 BLN into regional infrastructure with a massive development program.

Russian millionaire Oleg Deripaska's Basic Element Group has already announced it will pump up to $US 2 BLN into the Imeretinskaya Riviera where some major Olympic venues will be placed.

In the course of the next seven years the host city and its countryside will see active development of sports facilities and infrastructure.

Analysts say the region will only benefit from the preparations as well as improve the country's image abroad.

“First is the direct implication which is, you know, there will be a lot of money going to Krasnodar and Sochi to build up the infrastructure. There has already been quite a lot of money and there will be a lot more money coming to Sochi and Krasnodar. That is the first one. And the second one is it really puts Russia on the map in the big way, advertises what Russia really has to offer. The regions in general throughout Russia are really the new sort of frontier for people coming into Russia,” said Roland Nash from Renaissance Capital Group, Moscow.

First of all the region will benefit from direct federal and business investment.

By modernising and raising the profile of the region, analysts say foreign capital is sure to follow. They highlight in particular real estate and tourism.

Leading Russian companies are already active in the region, including Basic Element, Gazprom and Interros.

The regeneration of Sochi also adds to the government programme to further boost the economic activity of Russia's regions.

“Apart from the contribution to investment growth there are also potential dividends of TV coverage that Russia will get and that is estimated at quite high figures, perhaps as high as $US 1 BLN. Russia's diversification effort in terms of regional development would be considerably added by the attainment of this goal, by the attaining the Olympic Games,” added Yaroslav Lissovolik, Chief Economist at Deutsche Bank, Moscow.